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Chapter Six

Designing Organizations for the International Environment

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Four Stages of International Evolution

I.Domestic

II.International

III.Multinational

IV.Global

StrategicOrientation

Domestically oriented

Export-oriented, multidomestic

Multinational Global

Stage of Development

Initial foreign involvement

Competitive positioning

Explosion Global

Structure

Domestic structure plus export department

Domestic structure plus international division

Worldwide geographic, product

Matrix, trans-national

MarketPotential

Moderate, mostly domestic

Large, multidomestic

Very large, multinational

Whole world

Sources: Based on Nancy J. Adler, International Dimensions of Organizational Behavior (Boston: PWS-KENT, 1991), 7-8; and Theodore T. Herbert, “Strategy and Multinational OrganizationStructure: An Interorganizational Relationships Perspective,”Academy of Management Review 9 (1984): 259-71.

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Matching Organizational Structure to International Advantage

When Forces for Global

Integration are . . .

And Forces for National

Responsiveness are . . .

Strategy Structure

Low Low Export International Division

High Low Globalization Global Product Structure

Low High Multidomestic Global Geographic Structure

High High Globalization and

Multidomestic

Global Matrix Structure

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Domestic Hybrid Structure with International Division

ScientificProductsDivision

Research &Development

HumanResources

MedicalProductsDivision

Europe(Sales)

ElectricalProductsDivision

CorporateFinance

CEO

InternationalDivision

Brazil(Subsidiary)

Mid East(Sales)

Staff (Legal,Licensing)

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Partial Global Product Structure Used by Eaton Corporation

Engineering President InternationalLaw &CorporateRelations

Chairman

Finance & Administration

RegionalCoordinators

Global AutomotiveComponents

Group

GlobalIndustrial

Group

GlobalInstruments

ProductGroup

GlobalMaterialsHandling

Group

GlobalTruck

ComponentsGroup

Source: Based on New Directions in Multinational CorporateOrganization (New York: Business International Corp., 1981).

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Global Matrix StructureInternational

ExecutiveCommittee

PowerTransformers

Germany NorwayArgentina/

BrazilSpain/

Portugal

Transportation

Industry

BusinessAreas

Country Managers

LocalCompanies

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Building Global Capabilities

The Global Organizational ChallengeIncreased Complexity and Differentiation

Need for IntegrationKnowledge Transfer

Global Coordination MechanismsGlobal Teams

Headquarters PlanningExpanded Coordination Roles

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Cultural Differences in Coordination and Control

National Value SystemsPower Distance

Uncertainty Avoidance

Three National Approaches to Coordination and Control

Centralized Coordination in Japanese Companies

European Firms’ Decentralized ApproachThe United States: Coordination and Control

through Formalization

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Transnational Model of Organizations

Assets and resources are dispersed worldwide into highly specialized operations that are linked together through interdependent relationships.

Structures are flexible and ever-changing. Subsidiary managers initiate strategies and

innovations that become strategy for the corporation as a whole.

Unification and coordination are achieved primarily through corporate culture, shared visions and values, and management style rather than through formal structures and systems